Newk’s has been shrinking its units and evaluating the menu to bring down costs. | Photo courtesy of Newk’s.
The parent of the fast-casual Newk’s chain is on the hunt for another brand to add to its portfolio.
Late last year, FSC Franchise Co. quietly acquired the 100-unit Newk’s concept from Sentinel Capital Partners. FSC Franchise also owns the full-service Beef ‘O’ Brady’s and The Brass Tap brands, and the goal was to leverage the synergies of a shared platform and offer franchisees more options for growth within the same family.
Private-equity firm CapitalSpring owns a controlling stake in FSC Franchise, and would like to add at least one more brand to the portfolio, said Chris Elliott, CEO of FSC Franchise.
“CapitalSpring is aggressively looking, and they’ve sent a number of brands my way to evaluate, but there’s nothing at this point in the cross hairs,” said Elliott. “But we expect to put at least one more complimentary brand on the platform.”
Ideally it would be a concept along the lines of a First Watch, with breakfast and lunch dayparts and closing around 3 p.m., he said.
The platform model has become increasingly common, with companies like Craveworthy Brands, GoTo Foods, Inspire and others hoping, perhaps, to become the next Yum Brands or Darden Restaurants, finding economies of scale.
FSC is still in the early stages of integrating Newk’s into the platform, but so far it’s working, said Elliott.
Since the acquisition in the fourth quarter, Newk’s has already grown its average unit volume, which is now $2.4 million, up from about $2.2 million last year.
Frank Paci, Newk’s CEO who joined the brand in 2021 and remained in place through the transition, said six units last year did more than $4 million, while another seven surpassed $3 million.
Once a largely dine-in brand, Newk’s—which is known for its broad menu of soup, salad, sandwiches, pizza and mac and cheese—has been growing its off-premise sales with both third-party and catering. The chain has partnered with EZCater, as well as Uber Eats and DoorDash.
There have been investments in technology, with AI phone answering and ordering kiosks in some units. And Newk’s has been working to “right size” the menu and reduce complexity.
“If you can bring costs down while taking quality up at the same time, that’s a win,” said Paci.
Newk’s has also shrunk its restaurants somewhat, from about 4,000-square-feet historically, which has helped reduce costs. Recently opened units, for example, are about 3,300-square feet, with a bit less dine-in space. And Paci said they can get as small as 2,800-square feet in the right real estate.
About 30% of Newk’s is company owned. This year, FSC expects three franchised Newk’s units to open, along with 14 Brass Taps and three Beef ‘O’ Brady’s (though there may be some company-owned units in that mix, they said). And then FSC is planning to ramp up growth, adding about 25 to 30 units across all three brands each year going forward.
The company recently held the first gathering of all three brands under the portfolio.
“It was great for everybody to get together and we reinforced the idea that each brand will maintain its distinct identity and approach to the business. But there’s opportunity to share best practices,” said Elliott. “Like, Newk’s does a great job with catering, and the Beef ‘O’ Brady’s guys are all over that.”
Other synergies have included combining development, purchasing and even the culinary team functions, said Paci.
Adding a fourth brand into the mix will bring an opportunity to further take advantage of that shared infrastructure, said Elliott.
The “big, hairy, audacious goal” for the company is to pick up another concept in the next 12 to 18 months, and then to grow sales from about $550 million this year to a $1 billion in five years, said Elliott.
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